##### Table of Contents

 

 

**UNITED STATES SECURITIES ANDEXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**
 
**

**FORM 20-F**

 

**OR**

 

**For the fiscal year ended December 31, 2011**

**OR**

 

**OR**

 

**Date of event requiring this shell company report**

**For the transition period from              to             **

**Commission file number: 1-14251**

**SAP AG**

*(Exact name of Registrant as specified in its charter)*

**SAP CORPORATION**

*(Translation of Registrant’s name into English)*

**Federal Republic ofGermany**

*(Jurisdiction of incorporation or organization)*

**Dietmar-Hopp-Allee 16**

**69190 Walldorf**

**Federal Republic of Germany**

*(Address of principal executive offices)*

**Wendy Boufford**

**c/o SAP Labs**

**3410 Hillview Avenue, Palo Alto, CA, 94304, United States of America**

**650-849-4000 (Tel)**

**650-849-2650 (Fax)**

*(Name, Telephone, Email and/or Facsimile number andAddress of Company Contact Person)*

**Securities registered or to be registered pursuant to Section 12(b) of the Act:**

 

**Securities registered or to be registered pursuant to Section 12(g) of the Act: None**

**Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None**

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the periodcovered by the annual report: 

**Ordinary Shares, without nominal value: 1,228,083,382 (as of December 31, 2011)********

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 

Yes  þ    No   ̈

If this report is an annual or transition report, indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. 

Yes    ̈    No  þ

Note — Checking the box above will not relieve any registrant requiredto file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections. 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

Yes  þ    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) 

Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): 

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financialstatements included in this filing: 

U.S. GAAP   ̈                International Financial Reporting Standards as issued by the International Accounting StandardsBoard  þ                Other   ̈

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item theregistrant has elected to follow. 

Item 17   ̈    Item 18   ̈

If this is an annual report, indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes   ̈    No  þ

 

 

Table of Contents
**Table of Contents**

 

INTRODUCTION
  1  
FORWARD-LOOKING STATEMENTS
  2  
FINANCIAL MEASURES CITED IN THIS REPORT
  3  
PART I
  11  
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  11  
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  11  
ITEM 3. KEY INFORMATION
  11  
Selected Financial Data
  11  
Exchange Rates
  13  
Dividends
  13  
Risk Factors
  14  
ITEM 4. INFORMATION ABOUT SAP
  28  
The SAP Group of Companies
  28  
Portfolio of Software and Services
  35  
Research and Development
  45  
Partner Ecosystem
  54  
Acquisitions and Disposals
  56  
Energy and Emissions
  58  
Seasonality
  59  
Sales, Marketing and Distribution
  59  
Intellectual Property, Proprietary Rights and Licenses
  60  
Organizational Structure
  60  
Description of Property
  61  
ITEM 4A. UNRESOLVED STAFF COMMENTS
  63  
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  63  
Overview
  63  
Economic Conditions
  64  
Outlook for 2011
  65  
Foreign Currency Exchange Rate Exposure
  84  
Outlook
  85  
Liquidity and Capital Resources
  90  
Off-Balance Sheet Arrangements
  94  
Contractual Obligations
  95  
Research and Development
  95  
Critical Accounting Estimates
  96  
New Accounting Standards not yet Adopted
  96  
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
  97  
Supervisory Board
  97  
Executive Board
  98  
 
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Compensation Report
  99  
Employees
  117  
Share Ownership
  118  
Share-Based Compensation Plans
  118  
ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS
  119  
Major Shareholders
  119  
Related-Party Transactions
  120  
ITEM 8. FINANCIAL INFORMATION
  120  
Consolidated Financial Statements and Financial Statement Schedule
  120  
Other Financial Information
  120  
ITEM 9. THE OFFER AND LISTING
  121  
General
  121  
Trading on the Frankfurt Stock Exchange and the NYSE
  122  
ITEM 10. ADDITIONAL INFORMATION
  123  
Articles of Incorporation
  123  
Corporate Governance
  123  
Change in Control
  128  
Change in Share Capital
  128  
Rights Accompanying our Shares
  129  
Taxation
  130  
Material Contracts
  136  
Documents on Display
  136  
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  136  
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  137  
American Depositary Shares
  137  
PART II
  139  
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  139  
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OFPROCEEDS
  139  
ITEM 15. CONTROLS AND PROCEDURES
  139  
Evaluation of Disclosure Controls and Procedures
  139  
Management’s Annual Report on Internal Control Over Financial Reporting
  139  
Changes in Internal Control Over Financial Reporting
  139  
ITEM 16. [RESERVED]
  140  
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  140  
ITEM 16B. CODE OF ETHICS
  140  
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  140  
Audit Fees, Audit Related Fees, Tax Fees and All Other Fees
  140  
Audit Committee’s Pre-Approval Policies and Procedures
  140  
 
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ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  141  
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  141  
ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT
  142  
ITEM 16G. DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES
  142  
PART III
  146  
ITEM 17. FINANCIAL STATEMENTS
  146  
ITEM 18. FINANCIAL STATEMENTS
  146  
ITEM 19. EXHIBITS
  146  
Signatures
  148  
SAP AG and Subsidiaries
  F-1  
Report of Independent Registered Public Accounting Firm
  F-2  
Consolidated Financial Statements
  F-3  
 
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**INTRODUCTION**

SAP AG is a German stock corporation (Aktiengesellschaft) and is referred to in this report, together with its subsidiaries, as SAP, oras “Company,” “Group,” “we,” “our,” or “us.” Our Consolidated Financial Statements included in “Item 18. Financial Statements” in this report have been prepared in accordance withInternational Financial Reporting Standards as issued by the International Accounting Standards Board, referred to as IFRS throughout this report. 

In this report: (i) references to “US$,” “$,” or “dollars” are to U.S. dollars; (ii) references to “€” or “euro” are to the euro. Ourfinancial statements are denominated in euros, which is the currency of our home country, Germany. Certain amounts that appear in this report may not add up because of differences due to rounding. 

Unless otherwise specified herein, euro financial data have been converted into dollars at the noon buying rate in New York City forcable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on December 30, 2011, which was US$1.2973 per €1.00. No representation is made that sucheuro amounts actually represent such dollar amounts or that such euro amounts could have been or can be converted into dollars at that or any other exchange rate on such date or on any other date. The rate used for the convenience translations alsodiffers from the currency exchange rates used for the preparation of the Consolidated Financial Statements. This convenience translation is not a requirement under IFRS and, accordingly, our independent registered public accounting firm has notaudited these US$ amounts. For information regarding recent rates of exchange between euro and dollars, see “Item 3. Key Information — Exchange Rates.” On March 8, 2012, the Noon Buying Rate for converting euro to dollars wasUS$1.3256 per €1.00. 

Unless the context otherwise requires, references in this report to ordinary shares are to

SAP AG’s ordinary shares, without nominal value. References in this report to “ADRs” are to SAP AG’s American Depositary Receipts, each representing one SAP ordinary share.

SAP, R/3, SAP NetWeaver, Duet, PartnerEdge, ByDesign, SAP BusinessObjects Explorer, StreamWork, SAP HANA, and other SAPproducts and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and other countries. Business Objects and the Business Objects logo, BusinessObjects, Crystal Reports, CrystalDecisions, Web Intelligence, Xcelsius, and other Business Objects products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of Business Objects Software Ltd. Business Objects is an SAP company.Sybase and Adaptive Server, iAnywhere, Sybase 365, SQL Anywhere, and other Sybase products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of Sybase Inc. Sybase is an SAP company. Crossgate,m@gic EDDY, B2B 360°, and B2B 360° Services are registered trademarks of Crossgate AG in Germany and other countries. Crossgate is an SAP company. All other product and service names mentioned are the trademarks of their respectivecompanies. Data contained in this document serves informational purposes only. National product specifications may vary. 

Throughout this report, whenever a reference is made to our website, such reference does not incorporate by reference into this reportthe information contained on our website. 

We intend to make this report and other periodic reports publicly available on ourWeb site (www.sap.com) without charge immediately following our filing with the U.S. Securities and Exchange Commission (SEC). We assume no obligation to update or revise any part of this report, whether as a result of new information, future eventsor otherwise, unless we are required to do so by law. 
 
 
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**FORWARD-LOOKING STATEMENTS**

This report contains forward-looking statements and information based on the beliefs of, and assumptions made by, our management usinginformation currently available to them. Any statements contained in this report that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based theseforward-looking statements on our current expectations, assumptions, and projections about future conditions and events. As a result, our forward-looking statements and information are subject to uncertainties and risks. A broad range ofuncertainties and risks, many of which are beyond our control, could cause our actual results and performance to differ materially from any projections expressed in or implied by our forward-looking statements. The uncertainties and risks include,but are not limited to: 

 
 • 
Uncertainty in the global economy, financial markets, and in political conditions could have material negative impact on our business, financialposition, profit, and cash flows. 

 
 • 
Third parties have claimed, and might claim in the future, that we infringe their intellectual property rights, which could lead to damages beingawarded against us and limit our ability to utilize certain technologies in the future and could have a material negative impact on our business, financial position, profit, or cash flows. 

 
 • 
Undetected security flaws in our software or our proprietary systems or those of our third-party service and software providers may be exploited byother persons, which could damage SAP or our customers and significantly impact our financial position, profit, cash flows, and reputation. 

 
 • 
If our established customers do not buy additional software products, renew maintenance agreements, or purchase additional professional services, thiscould have a material adverse impact on
  
our business, financial position, profit, and cash flows. 

We describe these and other risks and uncertainties in the Risk Factors section. 

If one or more of these uncertainties or risks materializes, or if management’s underlying assumptions prove incorrect, our actualresults could differ materially from those described in or inferred from our forward-looking statements and information. 

Thewords “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “counting on,” “is confident,” “estimate,” “expect,” “forecast,”“guidance,” “intend,” “may,” “might,” “outlook,” “plan,” “project,” “predict,” “seek,” “should,” “strategy,” “want,”“will,” “would,” and similar expressions as they relate to us are intended to identify such forward-looking statements. Such statements include, for example, those made in the Operating Results section, our quantitative andqualitative disclosures about market risk pursuant to the International Financial Reporting Standards (IFRS), namely IFRS 7 and related statements in our Notes to the Consolidated Financial Statements, the Risk Factors section, our outlookguidance, and other forward-looking information appearing in other parts of this report. To fully consider the factors that could affect our future financial results, both our Annual Report and Annual Report on Form 20-F should be considered, aswell as all of our other filings with the Securities and Exchange Commission (SEC). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date specified or the date of this report. Exceptwhere legally required, we undertake no obligation to publicly update or revise any forward-looking statements as a result of new information that we receive about conditions that existed upon issuance of this report, future events, or otherwiseunless we are required to do so by law. 

This report includes statistical data about the IT industry and global economic trendsthat comes from information published by sources including International Data Corporation (IDC), a provider of market information and advisory
 
 
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services for the information technology, telecommunications, and consumer technology markets; investment bank Goldman Sachs; the European Central Bank (ECB); the International Monetary Fund(IMF); and the Organisation for Economic Co-operation and Development (OECD). This type of data represents only the estimates of IDC, Goldman Sachs, the ECB, the IMF, the OECD and other sources of industry data. SAP does not adopt or endorse any ofthe statistical information provided by sources such as IDC, Goldman Sachs, the ECB, the IMF, the OECD or other similar sources that is contained in this report. In addition, although we believe that data from these companies is generally reliable,this type of data is inherently imprecise. We caution readers not to place undue reliance on this data. 

**FINANCIAL MEASURES CITED IN THIS REPORT**

**Measures we Use to Manage Operating Performance**

We use various performancemeasures to help promote our primary goal of sustained growth in corporate value and our ancillary goal of profitable revenue growth. The following are the key measures we used in 2011: 

*Non-IFRS SSRS revenue:* Our software and software-related service (SSRS) revenue includes software and support revenue plussubscription and other software-related service revenue. The principal source of software revenue is the fees customers pay for software licenses. Software revenue is our key revenue driver because it tends to affect our other revenue streams.Generally, customers who buy software licenses also enter into maintenance contracts, and these generate recurring software-related service revenue in the form of support revenue after the software sale. Maintenance contracts cover support servicesand software updates and enhancements. We generate subscription and software-related service revenue when we provide software on subscription or in a cloud mode, that is, with obligatory hosting terms. Software revenue also tends to stimulateservice revenue from consulting and training sales. 

*Non-IFRS operating profit/non-IFRS operating margin:* In 2011, we used non-IFRSoperating profit/non-IFRS operating margin and constant currency non-IFRS operating profit/non-IFRS operating margin to measure our overall operational process efficiency and overall business performance. Non-IFRS operating margin is the ratio ofour non-IFRS operating profit to total non-IFRS revenue, expressed as a percentage. See below for a discussion of the IFRS and non-IFRS measures we use. 

**Measures we Use to Manage Non-Operating Performance**

We use the followingperformance measures to manage non-operating items: 

*Finance income, net:*    This measure providesinsight especially into the return on liquid assets and capital investments and the cost of borrowed funds. To manage our financial income, net, we focus on cash flow, the composition of our liquid asset and capital investment portfolio, and theaverage rate of interest at which assets are invested. We also monitor average outstanding borrowings and the associated finance costs. 

*DSO and DPO:*    We manage working capital by controlling the days’ sales outstanding for operating receivables, or DSO (defined as average number of days from the raisedinvoice to cash receipt from the customer), and the days’ payables outstanding for operating liabilities, or DPO (defined as average number of days from the received invoice to cash payment to the vendor). 

**Measures we Use to Manage Overall Performance**

For managing our overall performance we use the following measures: 

*Earningsper share (EPS):*    EPS measures our overall performance, because it captures all operating and non-operating elements of profit as well as income tax expense. It represents the portion of profit after tax allocable to eachSAP share outstanding (using the weighted average number of shares 
 
 
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outstanding over the reporting period). EPS is influenced not only by our operating and non-operating business, and income taxes, but also by the weighted average number of shares outstanding. Webelieve that stock repurchases and dividend distributions are a good means to return value to shareholders in accordance with the authorizations granted by them. 

*Effective tax rate:*    We define our effective tax rate as the ratio of income tax expense to profit before tax, expressed as a percentage. 

*Operating, investing and financing cash flows:*    Our consolidated statement of cash flows provides insight asto how we generated and used cash and cash equivalents. When used in conjunction with the other primary financial statements it provides information that helps us evaluate the changes of our net assets, our financial structure (including ourliquidity and solvency), and our ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities. 

**Value-Based Management**

Our holistic view of the performance measuresdescribed above together with our associated analyses comprise the information we use for value-based management. We use planning and control processes to manage the compilation of these key measures and their availability to our decision makersacross various management levels. 

SAP’s long-term strategic plans are the point of reference for our other planning andcontrolling processes, including creating a multi-year plan until 2015. We identify future growth and profitability drivers at a highly aggregated level. This process is intended to identify the best areas in which to target sustained investment.Next, we evaluate our multi-year

plans for our support and development functions and break down the customer-facing plans by sales region. Based on our detailed annual plans we determine the budget for the respective year. Wealso have processes in place to forecast revenue and profit on a quarterly basis to quantify whether we expect to realize our strategic goals and to identify any deviations from plan. We continuously monitor the concerned units in the Group toanalyze these developments and define any appropriate actions. 

Our entire network of planning, control, and reportingprocesses is implemented in integrated planning and information systems, based on SAP software, across all organizational units so that we can conduct the evaluations and analyses needed to make informed decisions. 

**Measures Used in this Report**

Like in prior years, we provided our 2011 outlook on the basis of certain non-IFRS measures as described above. Therefore, this report contains a non-IFRS based comparison of our actual performance in2011 against that outlook. 

This introductory section provides: 

 
 • 
A reconciliation of IFRS measures to the respective and most comparable non-IFRS measures 

 
 • 
An explanation of the non-IFRS measures we disclose in this report including an explanation of changes we made effective from January 1, 2012

 
 • 
The reasons why management believes these non-IFRS measures are useful to investors and the limitations of these measures 

 
 • 
An explanation of our constant currency information
 
 
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**Reconciliations of IFRS to Non-IFRS Numbers for 2011 and 2010**

The following tables reconcile our IFRS numbers to the respective and most comparable non-IFRS numbers for each of 2011 and 2010. Our 2010non-IFRS comparative amounts have been adjusted to conform to the amended non-IFRS definitions introduced in 2011 that also exclude expenses for share-based compensation and restructuring. Due to rounding, the sum of the numbers presented in thesetables might not precisely equal the totals we provide. 

**Reconciliations of IFRS to Non-IFRS Numbers for 2011 and 2010**

 
**€ millions, unless otherwise stated**  **for the years ended December 31,**    **2011**   **2010**    **IFRS**   **Adj.**   **Non-IFRS**   **Currency****Impact**   **Non-IFRS****Constant****Currency**   **IFRS**   **Adj.**   **Non-IFRS** 
**Revenue**
                
Software revenue
   3,971     0     3,971     96     4,067     3,265     0     3,265  
Support revenue
   6,967     27     6,994     58     7,052     6,133     74     6,207  
Subscription and other software-related service revenue
   381     0     381     –1     380     396     0     396  
**Software and software-related service revenue**
  ** ****11,319****  **  ** ****27****  **  ** ****11,346****  **  ** ****153****  **  ** ****11,499****  **  ** ****9,794****  **  ** ****74****  **  ** ****9,868****  **
Consulting revenue
   2,341     0     2,341     35     2,376     2,197     0     2,197  
Other service revenue
   573     0     573     8     581     473     0     473  
**Professional services and other service revenue**
  ** ****2,914****  **  ** ****0****  **  ** ****2,914****  **  ** ****43****  **  ** ****2,957****  **  ** ****2,670****  **  ** ****0****  **  ** ****2,670****  **  
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
 
**Total revenue**
  ** ****14,233****  **  ** ****27****  **  ** ****14,260****  **  ** ****196****  **  ** ****14,456****  **  ** ****12,464****  **  ** ****74****  **  ** ****12,538****  **  
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
 
**Total operating expenses**
                
Cost of software and software-related services
   –2,107     285     –1,822         –1,823     202     –1,621  
Cost of professional services and other services
   –2,248     32     –2,216         –2,071     18     –2,053  
Research and development
   –1,939     41     –1,898         –1,729     23     –1,706  
Sales and marketing
   –3,081     127     –2,954         –2,645     95     –2,550  
General and administration
   –715     30     –685         –636     26     –610  
Restructuring
   –4     4     0         3     –3     0  
TomorrowNow litigation
   717     –717     0         –981     981     0  
Other operating income/expense, net
   25     0     25         9     0     9    
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
 
**Total operating expenses**
  ********** ******–******9,352************  **  ********** ******–******198************  **  ********** ******–******9,550************  **  ********** ******–******127************  **  ********** ******–******9,677************  **  ********** ******–******9,873************  **  ** ****1,342****  **  ********** ******–******8,531************  **  
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
   
 

 
 
**Operating profit and margin**
                
**Operating profit**
  ** ****4,881****  **  ********** ******–******171************  **  ** ****4,710****  **  ** ****69****  **  ** ****4,779****  **  ** ****2,591****  **  ** ****1,416****  **  ** ****4,007****  **
**Operating margin in %**
  ** ****34.3****  **    ** ****33.0****  **    ** ****33.1****  **  ** ****20.8****  **    ** ****32.0****  **
 

**Explanation of Non-IFRS Measures**

We disclose certain financial measures, such as non-IFRS revenue, non-IFRS operating expenses, non-IFRS operating profit, non-IFRSoperating margin, non-IFRS earnings per share,

constant currency revenue and operating profit measures that are not prepared in accordance with IFRS and are therefore considered non-IFRS financial measures. Our non-IFRS financial measures maynot correspond to 
 
 
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non-IFRS financial measures that other companies report. The non-IFRS financial measures that we report should only be considered in addition to, and not as substitutes for or superior to,revenue, operating expenses, operating profit, operating margin, earnings per share or other measures of financial performance prepared in accordance with IFRS. 

We believe that the disclosed supplemental historical and prospective non-IFRS financial information provides useful information to investors because management uses this information, in addition tofinancial data prepared in accordance with IFRS, to attain a more transparent understanding of our past performance and our anticipated future results. In 2011, we used these non-IFRS measures consistently in our internal planning and forecasting,reporting and compensation, as well as in our external communications as follows: 

 
 • 
Our management primarily uses these non-IFRS measures rather than IFRS measures as the basis for making financial, strategic and operating decisions.

 
 • 
The variable remuneration components of our Executive Board members and employees are based on non-IFRS revenue and non-IFRS operating profit measuresrather than the respective IFRS measures. 

 
 • 
The annual budgeting process for all management units is based on non-IFRS revenue and non-IFRS operating profit numbers rather than the respectiveIFRS numbers. 

 
 • 
All forecast and performance reviews with all senior managers globally are based on these non-IFRS measures, rather than the respective IFRS numbers.

 
 • 
Both our internal performance targets and the guidance we provided to the capital markets are based on non-IFRS revenues and non-IFRS profit measuresrather than the respective IFRS numbers. 

Our non-IFRS financial measures reflect adjustments based on the items below, as well asadjustments for the related income tax effects. 

***Non-IFRS Revenue***

Revenue items identified as non-IFRS revenue have been adjusted from the respective IFRS numbers by including the full amount of supportrevenue that would have been recorded by entities acquired by SAP had they remained stand-alone entities but which we are not permitted to record as revenue under IFRS due to fair value accounting for the support contracts in effect at the time ofthe respective acquisitions. 

Under IFRS, we record at fair value the support contracts in effect at the time entities wereacquired. Consequently, our IFRS support revenue, our IFRS software and software-related service revenue, and our IFRS total revenue for periods subsequent to acquisitions do not reflect the full amount of support revenue that would have beenrecorded for these support contracts absent these acquisitions by SAP. Adjusting revenue numbers for this revenue impact provides additional insight into the comparability across periods of our ongoing performance. 

In light of our continuing focus on the cloud business and considering our recent acquisition of SuccessFactors, we are widening the rangeof revenues for which acquisition-related deferred revenue write downs are adjusted for in determining our non-IFRS revenue and profit numbers. We continue to adjust for deferred revenue write downs, that is for revenues that would have beenrecognized had the acquired entities remained stand-alone entities but that we are not permitted to recognize as revenue under IFRS as a result of business combination accounting rules. However, in the definitions of our non-IFRS measures usedthrough 2011, such adjustments for deferred revenue write downs were limited to support revenue. From 2012 onwards, we will also make such deferred revenue write down adjustments for cloud subscription revenue and other similarly recurring revenues.All other 
 
 
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non-IFRS measures will remain unchanged. As the deferred revenue write-down adjustments for recurring revenues other than support revenue from acquisitions that were executed through 2011 wereimmaterial, we do not restate prior period non-IFRS measures to align with the new definition. 

***Non-IFRS Operating Expense***

Operating expense figures that are identified as non-IFRS operating expenses have been adjusted by excluding thefollowing expenses: 

 
 • 
Acquisition-related charges 
 • 
Amortization expense/impairment charges of intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property(including purchased in-process research and development) 

 
 • 
Settlements of pre-existing business relationships in connection with a business combination 

 
 • 
Acquisition-related third-party expenses 

 
 • 
Discontinued activities: Results of discontinued operations that qualify as such under IFRS in all respects except that they do not represent a majorline of business. Under U.S. GAAP, which we reported under until 2009, we presented the results of operations of the TomorrowNow entities as discontinued operations. Under IFRS, results of discontinued operations may only be presented asdiscontinued operations if a separate major line of business or geographical area of operations is discontinued. Our TomorrowNow operations were separate, but were not a major line of business and thus did not qualify for separate presentation underIFRS. 

 
 • 
Expenses from our share-based compensation plans 

 
 • 
Restructuring expenses

***Non-IFRS Operating Profit, Non-IFRS Operating Margin, and Non-IFRS Earnings Per Share***

Operating profit, operating margin, and earnings per share identified as non-IFRS operating profit, non-IFRSoperating margin, and non-IFRS earnings per share have been adjusted from the respective IFRS measures by adjusting for the above-mentioned non-IFRS revenue and non-IFRS operating expenses. 

We exclude certain acquisition-related expenses for the purpose of calculating non-IFRS operating profit, non-IFRS operating margin, andnon-IFRS earnings per share when evaluating SAP’s continuing operational performance because these expenses generally cannot be changed or influenced by management after the relevant acquisition other than by disposing of the acquired assets.Since management at levels below the Executive Board has no influence on these expenses, we generally do not consider these expenses for the purpose of evaluating the performance of management units. Additionally, these non-IFRS measures have beenadjusted from the respective IFRS measures for the results of the discontinued activities, share-based compensation expenses and restructuring expenses. 

***Usefulness of Non-IFRS Measures***

We believe that our non-IFRSmeasures are useful to investors for the following reasons: 

 
 • 
The non-IFRS measures provide investors with insight into management’s decision-making, since management uses these non-IFRS measures to run ourbusiness and make financial, strategic and operating decisions. 

 
 • 
The non-IFRS measures provide investors with additional information that enables a comparison of year-over-year operating performance by eliminatingcertain direct effects of acquisitions and discontinued activities. 

 
 • 
Non-IFRS and non-GAAP measures are widely used in the software industry. In
 
 
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most cases, our non-IFRS measures are more suitable for comparison with our competitors’ corresponding non-IFRS and non-GAAP measures than are our IFRS measures.

Additionally, we believe that our adjustments to our IFRS numbers for the results of our discontinuedTomorrowNow activities are useful to investors for the following reasons: 

 
 • 
Despite the migration from U.S. GAAP to IFRS, we will continue to internally treat the ceased TomorrowNow activities as discontinued operations andthus will continue to exclude potential future TomorrowNow results, which are expected to mainly comprise expenses in connection with the Oracle lawsuit, from our internal management reporting, planning, forecasting, and compensation plans.Therefore, adjusting our non-IFRS measures for the results of the discontinued TomorrowNow activities provides insight into the financial measures that SAP uses internally. 

 
 • 
By adjusting the non-IFRS numbers for the results from our discontinued TomorrowNow activities, the non-IFRS numbers are more comparable to thenon-GAAP measures that SAP used through the end of 2009. That enhances the comparability of SAP’s performance measures before and after the full IFRS migration. 

We include the revenue adjustments outlined above and exclude the expense adjustments outlined above when making decisions to allocateresources, both on a company level and at lower levels of the organization. In addition, we use these non-IFRS measures to gain a better understanding of SAP’s operating performance from period to period. 

We believe that our non-IFRS financial measures described above have limitations, including but not limited to the following: 

 
 • 
The eliminated amounts may be material to us.
 • 
Without being analyzed in conjunction with the corresponding IFRS measures, the non-IFRS measures are not indicative of our present and futureperformance, foremost for the following reasons: 

 
 • 
While our non-IFRS profit numbers reflect the elimination of certain acquisition-related expenses, no eliminations are made for the additional revenueand other revenue that result from the acquisitions. 

 
 • 
While we adjust for the fair value accounting of the acquired entities’ recurring revenue contracts we do not adjust for the fair value accountingof deferred compensation items that result from commissions paid to the acquired company’s sales force and third parties for closing the respective customer contracts. 

 
 • 
The acquisition-related charges that we eliminate in deriving our non-IFRS profit numbers are likely to recur should SAP enter into material businesscombinations in the future. 

 
 • 
The acquisition-related amortization expense that we eliminate in deriving our non-IFRS profit numbers is a recurring expense that will impact ourfinancial performance in future years. 

 
 • 
The revenue adjustment for the fair value accounting of the acquired entities’ support contracts and the expense adjustment foracquisition-related charges do not arise from a common conceptual basis. This is because the revenue adjustment aims to improve the comparability of the initial post-acquisition period with future post-acquisition periods while the expense
 
 
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adjustment aims to improve the comparability between post-acquisition periods and pre-acquisition periods. This should particularly be considered when evaluating our non-IFRS operating profit andnon-IFRS operating margin numbers as these combine our non-IFRS revenue and non-IFRS expenses despite the absence of a common conceptual basis. 

 
 • 
Our discontinued activities and restructuring charges could result in significant cash outflows. The same applies to our share-based compensationexpense because most of our share-based compensation plans are to be settled in cash rather than shares. 

 
 • 
The valuation of our cash-settled, share-based payment plans could vary significantly from period to period due to the fluctuation of our share priceand other parameters used in the valuation of these plans. 

 
 • 
We have in the past issued share-based compensation awards to our employees every year, and intend to continue doing so in the future. Thus ourshare-based compensation expenses are recurring although the amounts usually change from period to period. 

Despite these limitations, we believe that the presentation of the non-IFRS measures and the corresponding IFRS measures, together withthe relevant reconciliations, provides useful information to management and investors regarding present and future business trends relating to our financial condition and results of operations. We do not evaluate our growth and performance withoutconsidering both non-IFRS measures and the relevant IFRS measures. We caution the readers of our financial reports to follow a similar approach by considering our

non-IFRS measures only in addition to, and not as a substitute for or superior to, revenue or other measures of our financial performance prepared in accordance with IFRS. 

***Constant Currency Information***

We believe it is important for investors to have information that provides insight into our sales. Revenue measures determined under IFRS provide information that is useful in this regard. However, bothsales volume and currency effects impact period-over-period changes in sales revenue. We do not sell standardized units of products and services, so we cannot provide relevant information on sales volume by providing data on the changes in productand service units sold. To provide additional information that may be useful to investors in breaking down and evaluating changes in sales volume, we present information about our revenue and various values and components relating to operatingprofit that are adjusted for foreign currency effects. We calculate constant currency revenue and operating profit measures by translating foreign currencies using the average exchange rates from the previous year instead of the current year.

We believe that constant currency measures have limitations, particularly as the currency effects that are eliminatedconstitute a significant element of our revenue and expenses and could materially impact our performance. We therefore limit our use of constant currency measures to the analysis of changes in volume as one element of the full change in a financialmeasure. We do not evaluate our results and performance without considering both constant currency measures in non-IFRS revenue and non-IFRS operating profit measures on the one hand and changes in revenue, operating expenses, operating profit, orother measures of financial performance prepared in accordance with IFRS on the other. We caution the readers of our financial reports to follow a similar approach by considering constant currency measures only in addition to, and not as asubstitute for or superior to, changes in revenue, operating expenses, operating profit, or other measures of financial performance prepared in accordance with IFRS.
 
 
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**Free Cash Flow**

We use our free cash flow measure to estimate the cash flow remaining after all expenditures required to maintain or expand our organic business have been paid off. This measure provides management withsupplemental information to assess our liquidity needs. We calculate free cash flow as net cash from operating activities minus purchases, other than purchases made in connection with business combinations, of intangible assets and property, plant,and equipment. 

**Free Cash Flow**

 
**€ millions**  **2011**   **2010**   **Change** 
Net cash flows from operating activities
   3,775     2,922     29% 
Purchase of intangible assets and property, plant, and equipment
   –445     –334     33%   
 

 
   
 

 
   
 

 
 
**Free cash flow**
  ** ****3,330****  **  ** ****2,588****  **  ** ****29****% ** 
 
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Part I 

 

Item 1, 2, 3 

 
**PART I**

**ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**

Not applicable. 

**ITEM 2. OFFER STATISTICS AND EXPECTEDTIMETABLE**

Not applicable. 

**ITEM 3. KEY INFORMATION**

**SELECTED FINANCIAL DATA**

The following table sets forth our selected consolidated financial data as of and for each of

the years in the five-year period ended December 31, 2011. The consolidated financial data has been derived from, and should be read in conjunction with, our Consolidated FinancialStatements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS), presented in “Item 18. Financial Statements” of this report. 

Our selected financial data and our Consolidated Financial Statements are presented in euros. Financial data as of and for the yearended December 31, 2011 has been translated into U.S. dollars for the convenience of the reader. 
 
 
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Item 3 

 
**SELECTED FINANCIAL DATA: IFRS**

 
**millions, unless otherwise stated**  **2011(1)**   **2011**   **2010**   **2009**   **2008**   **2007**    **US$**   **€**   **€**   **€**   **€**   **€** 
**Income Statement Data: Years ended December 31,**

**  **
          
Software and software-related service revenue
   14,684     11,319     9,794     8,198     8,457     7,427  
Total revenue
   18,464     14,233     12,464     10,672     11,575     10,256  
Operating profit
   6,332     4,881     2,591     2,588     2,701     2,698  
Operating margin in %(2)
   34.3     34.3     20.8     24.3     23.3     26.3  
Profit after tax
   4,461     3,439     1,813     1,750     1,848     1,908  
Profit attributable to owners of parent
   4,460     3,438     1,811     1,748     1,847     1,906  
Earnings per share(2) 
            
Basic in €
   3.75     2.89     1.52     1.47     1.55     1.58  
Diluted in €
   3.75     2.89     1.52     1.47     1.55     1.58  
**Other Data:**
            
Weighted-average number of shares outstanding
            
Basic
   1,189     1,189     1,188     1,188     1,190     1,207  
Diluted
   1,190     1,190     1,189     1,189     1,191     1,210  
**Statement of Financial Position Data: At December 31,**

**  **
        
Cash and cash equivalents
   6,441     4,965     3,518     1,884     1,280     1,608  
Total assets(3)
   30,130     23,225     20,839     13,374     13,900     10,161  
Current financial liabilities(4)
   1,727     1,331     142     146     2,563     82  
Non-current financial liabilities(4)
   3,795     2,925     4,449     729     40     6  
Issued capital(5)
   1,593     1,228     1,227     1,226     1,226     1,246  
Total equity
   16,485     12,707     9,824     8,491     7,171     6,478  
 

 
(1) 
Amounts presented in US$ have been translated for the convenience of the reader at €1.00 to US$1.2973, the Noon Buying Rate for converting€1.00 into dollars on December 30, 2011. See “Item 3. Key Information — Exchange Rates” for recent exchange rates between the Euro and the dollar. 

 
(2) 
Operating profit is the numerator and total revenue is the denominator in the calculation of operating margin. Profit attributable to owners of parentis the numerator and weighted average number of shares outstanding is the denominator in the calculation of earnings per share. 

 
(3) 
The large increase in total assets from 2009 to 2010 was mainly due to the acquisition of Sybase in 2010 and the large increase in total assets from2007 to 2008 was due to the acquisition of Business Objects in 2008. See Note (4) to our Consolidated Financial Statements for more information on acquisitions. 

 
(4)
The balancesinclude primarily bonds, private placements and bank loans. Current is defined as
 having a remaining life of one year or less; non-current is defined as having a remaining term exceeding one year. The significant increase in current financial liabilities during 2008 was due tofinancial debt incurred to finance the acquisition of Business Objects. The significant increase in non-financial liabilities in 2010 was due to an acquisition-term loan used to finance the acquisition of Sybase. In addition, we issued two bonds anda U.S. private placement transaction, of which, the proceeds were primarily used to finance the acquisition of Sybase. See Note (18b) to our Consolidated Financial Statements for more information on our liabilities. 
 
(5) 
The 2007 and 2008 figures reflect cancellations of 23 million and 21 million treasury shares effective September 7, 2007 andSeptember 4, 2008, respectively. See “Item 9. The Offer and Listing — General” for more detail on the cancellation of shares.
 
 
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Part I 

 

Item 3 

 
**EXCHANGE RATES**

The prices for ordinary shares traded on German stock exchanges are denominated in euro. Fluctuations in the exchange rate between theeuro and the U.S. dollar affect the dollar equivalent of the euro price of the ordinary shares traded on the German stock exchanges and, as a result, may affect the price of the ADRs traded on the NYSE in the United States. See “Item 9. TheOffer and Listing” for a description of the ADRs. In addition, SAP AG pays cash dividends, if any, in euro. As a result, any exchange rate fluctuations will also affect the dollar amounts received by the holders of ADRs on the conversion intodollars of cash dividends paid in euro on the ordinary shares represented by the ADRs. Deutsche Bank Trust Company Americas is the depositary (the Depositary) for SAP AG’s ADR program. The deposit agreement with respect to the ADRs requires theDepositary to convert any dividend payments from euro into dollars as promptly as practicable upon receipt. For additional information on the Depositary and the fees associated with SAP’s ADR program see “Item 12 Description of SecuritiesOther Than Equity Securities — American Depositary Shares.” 

A significant portion of our revenue and expense isdenominated in currencies other than the euro. Therefore, fluctuations in the exchange rate between the euro and the respective currencies in which we conduct business could materially affect our business, financial position, income or cash flows.See “Item 5. Operating and Financial Review and Prospects — Foreign Currency Exchange Rate Exposure” for details on the impact of these exchange rate fluctuations.

The following table sets forth (i) the average, high and low Noon Buying Rates for theeuro expressed as U.S. dollars per €1.00 for the past five years on an annual basis and (ii) the high and low Noon Buying Rates on a monthly basis from July 2011 through March 8, 2012. 

 

**Year**
  **Average(1)**   **High**   **Low** 
2007
   1.3797     1.4862     1.2904  
2008
   1.4695     1.6010     1.2446  
2009
   1.3955     1.5100     1.2547  
2010
   1.3216     1.4536     1.1959  
2011
   1.4002     1.4875     1.2926  
 

**Month**
  **High**   **Low** 
2011
    
July
   1.4508     1.4014  
August
   1.4510     1.4158  
September
   1.4283     1.3446  
October
   1.4172     1.3281  
November
   1.3803     1.3244  
December
   1.3487     1.2926  
2012
    
January
   1.3192     1.2682  
February
   1.3463     1.3087  
March (through March 8, 2012)
   1.3320     1.3114  
 
(1) 
The average of the applicable Noon Buying Rates on the last day of each month during the relevant period. 

The Noon Buying Rate on March 8, 2012 was US$1.3256 per €1.00. 

**DIVIDENDS**

**Dividend Distribution Policy**

Dividends are jointly proposed by SAP AG’s Supervisory Board (Aufsichtsrat) and Executive Board (Vorstand) based on SAP AG’syear-end stand-alone statutory financial statements, subject to approval by the shareholders. Dividends are officially declared for the prior year at SAP AG’s Annual General Meeting of Shareholders. SAP AG’s Annual General Meeting ofShareholders usually 
 
 
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Item 3 

 
convenes during the second quarter of each year. Dividends are usually remitted to the custodian bank on behalf of the shareholder within one business day following the Annual General Meeting ofShareholders. Record holders of the ADRs on the dividend record date will be entitled to receive payment of the dividend declared in respect of the year for which it is declared. Cash dividends payable to such holders will be paid to the Depositaryin euro and, subject to certain exceptions, will be converted by the Depositary into U.S. dollars. 

Dividends paid to holdersof the ADRs may be subject to German withholding tax. See “Item 8. Financial Information — Other Financial Information — Dividend Policy” and “Item 10. Additional Information — Taxation,” for further information.

**Annual Dividends Paid and Proposed**

The following table sets forth in euro the annual dividends paid or proposed to be paid per ordinary share in respect of each of the years indicated. One SAP ADR currently represents one SAP AG ordinaryshare. Accordingly, the final dividend per ADR is equal to the dividend for one SAP AG ordinary share and is dependent on the euro/U.S. dollar exchange rate. The table does not reflect tax credits that may be available to German taxpayers whoreceive dividend payments. If you own our ordinary shares or ADRs and if you are a U.S. resident, refer to “Item 10. Additional Information — Taxation,” for further information. 

 
  **Dividend Paid**